Liontrust Latin America Fund

Q3 2019 review

The Liontrust Latin America Fund returned -4.1% during the third quarter of the year, behind the MSCI Latin America Index return of -2.5%. Over one year, the Fund has returned 18.2%, outperforming the benchmark’s 13.3% gain.

Market overview

The primary driver of global markets during the third quarter was the renewed escalation of the US – China trade war with further tariffs being applied by both sides in August, although September saw some improvement in risk appetite as both sides agreed to face-to-face talks in October and some tariffs were delayed. The Federal Reserve cut rates by 50 basis points during the quarter and more cuts are expected before year-end. The ECB cut its deposit rate by a further 10bps to -50bps and restarted its QE programme on an open-ended basis.

Latin America was not spared the weakness in global markets with Mexico the only market to generate positive returns. Most notably, Argentina fell by 45% during the quarter as President Mauricio Macri fared poorly in the Primary Elections ahead of October’s Presidential Election. It now looks very unlikely that Macri will be re-elected which raises questions over the continuity of the more orthodox policies he has implemented. Elsewhere, Brazil continued to make good progress on Bolsonaro’s reform agenda with the Pension Reform being passed in the Lower House and approval in the Senate is expected in October. Attention will now turn to the wide-ranging reform agenda with the Tax Reform likely to be front and centre during the fourth quarter. Key contributors to the underperformance of the Fund over the quarter were our positions in two Argentine stocks and Mexican financials, while these were offset to a degree by strong returns in Brazilian consumer and IT stocks.

Outlook

Looking across emerging markets, investors are crying out for reformist governments. In Asia, we have seen this with India, and in Latin America Peru, Chile, Colombia and now Brazil have elected strong pro-market governments. The populist tide has finally reversed as governments focus on structural reforms to raise productivity and economic growth.

Discrete years' performance* (%), to previous quarter-end:

 

 

Sep-19

Sep-18

Sep-17

Sep-16

Sep-15

Liontrust Latin America C Acc

18.2

-3.9

29.4

46.0

-30.9

MSCI EM Latin America Index

13.3

-6.1

22.0

50.5

-34.2

*Source: Morningstar as at 30.09.2019, on 17.10.2019.

 

For a comprehensive list of common financial words and terms, see our glossary here.

 

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.

Disclaimer

The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Wednesday, October 23, 2019, 9:38 AM